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“Your Own Cybersecurity Is Not Enough”: NJ Physician Practice Fined Over $400,000 for Data Breach Caused By Vendor

Last week, New Jersey Attorney General Gurbir S. Grewal and the New Jersey Division of Consumer Affairs (“Division”) announced that a physician group affiliated with more than 50 South Jersey medical and surgical practices agreed to pay $417,816 and improve data security practices to settle allegations it failed to properly protect the privacy of more than 1,650 patients whose medical records were made viewable on the internet as a result of a server misconfiguration by a private vendor.

Sharon M. Joyce, Acting Director of the Division, warns HIPAA covered entities:

[Y]our own cybersecurity is not enough.  You must fully vet your vendors for their security as well.

One of the significant changes made by the Health Information Technology for Economic and Clinical Health (HITECH) Act is that state Attorneys General were given authority to enforce the privacy and security regulations under the Health Insurance Portability and Accountability Act (HIPAA). Accordingly, covered entities and business associates should remember that the federal Office for Civil Rights is not the only game in town when it comes to investigating data breaches and imposing fines when HIPAA violations are found. New Jersey is not the only state that has used this authority.

In this case, according to the NJ Office of Attorney General, the physician practice used a third party vendor to transcribe dictations of medical notes, letters, and reports by doctors, a popular service provided to many physical practices and other medical providers across the country. When the vendor, a HIPAA business associate, attempted to update software on a password-protected File Transfer Protocol website (“FTP Site”) where the transcribed documents were kept, it unintentionally misconfigured the web server, allowing the FTP Site to be accessed without a password. As a result, anyone who searched Google using search terms that happened to be contained within the dictation information would have been able to access and download the documents located on the FTP Site. These documents would have included doctor names, patient names, and treatment information concerning patients.

Following notification of the breach, the Division investigated and found HIPAA violations beyond the vendor’s security incident. The Division identified violations of HIPAA’s privacy and security regulations by the physician practice, including:

  • Failing to have a security awareness and training program for its workforce members, including management.
  • Delayed response to the incident and mitigation.
  • Failing to create and maintain retrievable exact copies of ePHI maintained on the FTP site.
  • Failing to maintain a written or electronic log of the number of times the FTP Site was accessed.

There are at least three important lessons from this case for physical practices in New Jersey and in other states:

  1. The New Jersey Office of Attorney General and the Division of Consumer Affairs, and Attorneys General in other states, are ready, willing and able to enforce the HIPAA privacy and security regulations.
  2. While investigating data breaches, federal and state officials are concerned about more than the breaches themselves. They will investigate the state of the covered entity’s privacy and security compliance prior to the breach. Accordingly, covered entities should not wait to experience a data breach before tightening up their privacy and security compliance programs.
  3. HIPAA covered entities need to identify their business associates and take steps to be sure they are complying with the HIPAA security regulations. Business associates can be the weakest link in a covered entity’s compliance efforts.
Jackson Lewis P.C. © 2022National Law Review, Volume VIII, Number 99

About this Author


Joseph J. Lazzarotti is a principal in the Berkeley Heights, New Jersey, office of Jackson Lewis P.C. He founded and currently co-leads the firm's Privacy, Data and Cybersecurity practice group, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP) with the International Association of Privacy Professionals. Trained as an employee benefits lawyer, focused on compliance, Joe also is a member of the firm’s Employee Benefits practice group.

In short, his practice focuses on the matrix of laws governing the privacy, security, and...

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